Llanelli Scarlets: questions raised over financial help council gives to club

Financial help given to Llanelli Scarlets could constitute unlawful state aid under EU rules, it has been suggested.

Financial help given to Llanelli Scarlets could constitute unlawful state aid under EU rules, it has been suggested.

Sian Caiach, an Independent member of Carmarthenshire County Council, claims aid to the rugby club may breach European competition law.

She points out that state aid rules have previously been cited over suggestions that public money should be used to help football clubs like Glasgow Rangers, Everton and West Ham.

Ms Caiach said: “There are strict EU rules as to how much any arm of government, including councils, can give to private companies called the EU state aid rules. The purpose is to prevent government subsidies from allowing private institutions unfair trading advantages.

“The huge amount of public money used to help the Scarlets appears to be well over the amounts normally allowed and the regulations seem to include private sporting clubs. For over two years I have formally asked many times, in writing and in council meetings, for information on whether these transactions do or do not contravene EU state aid laws as the Scarlets are certainly a private company.

“The total subsidy amounts to many millions of pounds, depending on exactly what is assessed as a contribution to the club. I think most residents of Carmarthenshire would agree that however important rugby is, considering the magnitude of our support, the millions were not worth it, especially in view of our dire financial situation today.

“If the money had been ‘banked’ and not spent I believe we could possibly have frozen our council tax for the next three years as well as having no cuts in any of our front line services just using the money recently devoted to the Scarlets.”

Ms Caiach added that the council’s chief executive Mark James had assured her that a legal opinion existed from 2007 explaining why Carmarthenshire County Council was exempt from EU state aid law in this regard, but that he had so far not supplied her with details of it. She has now made a request under the Freedom of Information Act for the legal opinion to be disclosed.

Last May Mr James dismissed claims made by critics that the council had ploughed up to £40m into the club. He said the council had invested £10.2m in the development of the Parc Y Scarlets stadium, along with £5.6m Section 106 legal agreement money and a loan of £2.4m.

Critics said the £14m value of the land on which the new stadium was built should also be included in the total, although Mr James described such a view as “nonsense”, as the council still owns the freehold of the land, which could be sold for alternative development if the club ever stopped playing rugby.

Scarlets chief executive Mark Davies insists that the club provides considerable benefit to the local economy, estimating that by 2015-16 its cumulative economic impact will be £117m, including tax revenues of £33.9m to the state.

The EU’s state aid rules are notoriously complex. The European Treaty contains a general prohibition of state aid, but it also leaves room for a number of policy objectives with which state aid can be considered compatible.

The objective of state aid control is to ensure that government interventions do not distort competition and trade in the internal market. It is therefore an essential part of the EU’s competition policy.

In the sports sector, state aid mainly finances infrastructure or the activities of individual sport clubs. There have been few formal decisions so far where the Commission has applied EU state aid provisions to the sports sector.

An explanatory statement on the European Commission’s website says: “Amateur sports clubs are generally not considered as undertakings within the meaning of the Treaty, so that subsidies granted to these entities are generally not covered by the state aid rules.

"On the other hand, professional sports clubs are engaged in economic activities, and these are covered by the state aid rules to ensure that subsidies do not disrupt fair competition.”

Plans to build a new stadium for Everton FC foundered following allegations that a local council’s offer of land to the club amounted to state aid.

Last October West Ham’s move to the Olympic Stadium was thrown into doubt after the European Commission said it might constitute state aid.

Although the level of Glasgow Rangers debts placed the club beyond realistic hopes of salvation, members of Glasgow City Council quickly acknowledged that any attempt to help the club would be in breach of state aid rules.

Responding to Ms Caiach’s comments about the EU state aid rules, a spokesman for Carmarthenshire County Council would only say that the Freedom of Information Act request submitted by her was under consideration.

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